India remains committed to reducing the budget deficit over the medium term, despite its focus on higher public capex and demands of the coalition government, Fitch Ratings said on Tuesday.
Fitch said India using RBI dividend to lower its fiscal deficit target for the fiscal year ending March 2025, reinforces its view that the country prefers fiscal consolidation over additional spending.
Still, India’s deficit, and interest-to-revenue and debt ratios remain high compared with the ‘BBB’ category sovereign peers, Fitch said.
“…we believe its (India) government remains committed to reducing the budget deficit over the medium term, even amid the demands that governing in the coalition will impose on the newly elected administration – and despite the government’s sustained focus on supporting economic growth through higher public capex,” the rating agency said.
In the full Budget presented in July, the government lowered the fiscal deficit target to 4.9 per cent for the current financial year against 5.1 per cent estimated in February’s interim Budget.
In May, the RBI board approved a Rs 2.11 lakh crore dividend to the government for 2023-24 fiscal.